This is a pretty profitable business, more profitable than most.

That's kind of a lot of money

Even if it benefited the publishers, it was a creative right and author's right.

And when people talk about earnings of a company, this is what they're talking about.

So you've probably heard not only the term earnings, you've probably also heard the term earnings per share.

They buy more of your service and they tell more of their friends, which leads to more profit.

We are assuming a very simple world, were the is no taxes, we have no debt, we have no intrest or things

And at least it'll give you a sense of how revenues, gross profit, operating profit, pre tax income and net income really are different.

And you'll hear these numbers, gross and operating profit and net profit and pretax profit, and it's very hard to understand that these are actually very, very different things, because they all have the word profit, and what does gross and operating and all that mean?

And let's say, assume if I inherited this million dollars, I didn't finance it.

It's good for everybody.

But again, fun is not enough.

Well, then you're going to spend this much to rent the money, right?

This is really important to pay attention to, because so many people say, oh, a company made this much.

These are the only people who really have, arguably the sophistication and the time and the monetary incentive to really look and scrutinize what management is doing.

This is what the owners of the company get before they pay the government.

(Laughter) But I know it's the bottom line, or one's perception of it, that motivates people in the end.

We know how much it takes to build our product.

Then the companies or those factories or whatever you want to think of them,

And then if you subtract your costs from your revenue, or if you just add these two numbers, because this one is negative, you have your gross profit.

And then, how much am I making from the business now?

So EBlT, I kind of view that it goes backwards.

Utilities are still rewarded when their customers waste energy.

But here you see it means very, very different things.

In return on equity, the numerator is the net income that we got, so it's 350,000.

But when you lower the Price to Earnings you are increasing the Earnings to Price.

I'll just abbreviate that as Nl.

What's in it for the institution?

The assets are generating this.

Kill the goose that lays the golden eggs.

People tend to place a much higher value on losses than on gains.

But in general if you take EBlT and you take out the non operating income, you get back to operating profits.

And then I'll do a more philosophical video on why these things even exist, and why they're useful, and why people may benefit or may not benefit from these things.

And if I lend it to someone other than the government,

So, let's see, you have to do 1.85.

So what they do is they just take your earnings number and you divide by the number of shares.

So that's what I'm paying for, arguably.

You sold it 50, you borrowed and sold 50, then when it went down 20 you bought is back, you bought it back for 20

Minus 500,000.

Why isn't it on every poster across the third world?

So it will benefit, because you are discounting some of the cash payments.

They have no interest expense, because that's not the point of this video.

So what are they?

Our interests clash with theirs.

With trade, there's mutual interdependency and mutual gain between parties.